Last week, Horseman Capital’s Russell Clark said the level of capital flows into the United States may not keep the dollar strong. That’s bad news for anyone sitting on cash or seeking ways to generate income from their money.
However, private sector deficits in China and Europe are sitting near zero.
This means almost all of the money coming out of Japan is heading to the United States.
And that is poised to send U.S. bond prices lower. Global investors will stretch every new dollar for income drawn from safe-haven assets.
Of course, these investors are ignoring the best place to obtain a solid dividend, especially in the face of low interest rates, increasing rental payments, and rising real estate prices.
They’re called real estate investment trusts (REITs). They’ve been one of the top-performing assets of the last 20 years thanks in part to the Fed’s commitment to low interest rates.
Today, I’m going to discuss one small-cap REIT that has risen sharply over the last 12 months but still remains under the radar on Wall Street.
It pays more than a 7% annual dividend that you can lock in today and ride through the balance of 2020…
A 7% Dividend REIT with Sharp Upside as Rates Fall
There are several advantages to REITs many investors overlook.
First, they generate gobs of cash from rent and other property income. They also provide distinct tax benefits that are hard to obtain anywhere else.
Third, REITs do not pay corporate income taxes. That means higher levels of cash flow are given to investors.
Combine those benefits with companies that own properties in places where prices are rising, and you have a winning recipe for outperformance…
That brings us to today’s small cap REIT. It pays a 7% dividend yield and has a high probability of outperforming the broader market over the next 12 months.
I’m talking about Plymouth Industrial REIT Inc. (NYSE: PLYM).
This vertically integrated and self-managed REIT centers its attention on single- and multi-tenant industrial properties in U.S. primary and secondary markets.
Plymouth owns and manages 85 properties with 114 buildings. It owns more than 18 million square feet of property that focuses on the industrial space.
The firm’s strategy has centered on owning and managing Class B properties, which executives believe can outperform Class A spaces.
In a recent interview with Nareit, CEO Jeff Witherall said that Class B properties are providing a solid risk-reward profile. “We have high tenant renewal rates and, for the last three or four years, we’ve seen higher than average rental growth rates with limited risk,” he said.
The company operates in 11 states, but the focus on secondary markets has taken hold since the firm went public in 2017.
It places focus on these markets because they are economically and socially diverse, growing, and still have assets that are modestly priced.
The firm places a priority on expanding its footprint in Chicago, Cincinnati, Columbus, Cleveland, Atlanta, Memphis, Tennessee, and Indiana.
Action to Take: PLYM trades at $20.65 per share and carries a rock-solid yield of 7.2%. Looking ahead, I project that an uptick in inflation combined with an influx of capital into real estate assets will push PLYM shares to roughly $30 per share. On top of that solid dividend, you are looking at upside in the next 12 months of 45%.
— Garrett Baldwin
Source: Money Morning